Buyers rally as rates drop and grant grows

BUYERS benefiting from the doubling of the first home owner grant have boosted confidence in the NSW property market.

Figures from Australian Property Monitors show a spike in the auction clearance rate. It hit 60.1 per cent yesterday.

The clearance rate was 54.3 per cent the previous Saturday. At auctions, in the week ending October 11, only 48 per cent of homes sold, APM figures show. Agents and auctioneers said that along with a recent drop in mortgage interest rates, the Federal Government's financial incentives had increased interest among buyers.

Auctioneer Tom Panos said there was an increase of about 50 per cent in auction attendances he conducted yesterday, especially for lower-priced apartments.

Federal Housing Minister Tanya Plibersek agreed there were indications of a boost in confidence since the announcement of grant increases. Builders and developers were reporting a big increase in inquiries by first home buyers, she said.

It will certainly go some way (in the lower segment of the market anyway) towards restoring confidence in the current property market, and I anticipate price growth in the next 2 yrs due to this. Whether or not they can afford to retain them as PPOR's, or rent them out after the minimum requirement period, remains to be seen. Increasing rents, however, will make up for the difference. As the gap "closes" between rents and mortgage payments, we may well see even more first home owners taking advantage, even in these times of tight credit (there's always mum and dad's equity )

This is a general comment only and does not constitute advice. Before making financial decisions you should seek advice from a professional adviser, who can take into account your specific circumstances and investment goals.

From someone who's on the ground and talking to agents almost on a daily basis, I can tell you that, without even asking, four agents have told me (when inspecting) how their enquiries for lower end priced properties surged over the weekend due to the grant increase. Particularly in units, and houses in the Hornsby/Hills/Northwest districts in the "relatively" first home buyer market, I expect there bargains becoming thinner on the ground.

This is a general comment only and does not constitute advice. Before making financial decisions you should seek advice from a professional adviser, who can take into account your specific circumstances and investment goals.